Section 2: Case study 2 — John Simpson Background John has been a self-employed carpenter for 10 years, and operates his business under a company structure. He has approached you for help in arranging finance for a potential purchase of an investment property. He was referred to you by his accountant, who is a friend of yours. Apart from purchasing the home he currently lives in some 12 years ago, he has had no other experience in dealing with a mortgage application, though he has recently obtained finance for a new work truck via his local bank. He has found a property he likes, and has already secured the services of a solicitor to assist with the purchase. John currently owes $375,000 and estimates his home to be worth $650,000. He has agreed to purchase the investment property for $300,000 and needs to borrow the full purchase price plus $20,000 to cover stamp duty, and other associated costs including a $5,000 'cash reserve' in case there are delays in securing a tenant for the property. After reading the case study above, answer the questions below. Task 10 — Establishing level of financial knowledge What communication skills might you use to establish and confirm John's level of knowledge about credit and finance and to establish his needs? (150 words) Student response to Task 10 Answer here Assessor feedback: Resubmission required? No Task 11 — Usingequity 1. How is it possible for John to borrow 100% of the purchase price + costs? Student response to Task 11: Question 1 Answer here Assessor feedback: Resubmission required? No 2. Assuming John uses the same bank to finance his home and the investment property he wishes to purchase, what is the loan to value ratio (LVR)? Please show the percentage up to two decimal places in your answer. Student response to Task 11: Question 2 Answer here Assessor feedback: Resubmission required? No Task 12 — Self Employed special considerations 1. As John is self-employed via his company, name three (3) possible extra documents you will need to obtain and assess? Student response to Task 12: Question 1 Answer here Assessor feedback: Resubmission required? No 2. If a Low Doc application is an option for the customer, name three (3) extra documents you will need to obtain and assess. Student response to Task 12: Question 2 Answer here Assessor feedback: Resubmission required? No 3. Explain how applying for a 'Low Doc Loan' could lead the mortgage broker to be accused of recommending an 'unsuitable' product. Student response to Task 12: Question 3 Answer here Assessor feedback: Resubmission required? No Task 13 — John's professional network 1. Name three (3) parties John may wish you to keep informed of the progress of his finance application. Student response to Task 13: Question 1 Answer here Assessor feedback: Resubmission required? No 2. Briefly outline to John the process that will occur from your meeting onwards. Student response to Task 13: Question 2 Answer here Assessor feedback: Resubmission required? No 3. Although some of these stages do not involve the mortgage broker, briefly explain why it is important to keep abreast of developments. Student response to Task 13: Question 3 Answer here Assessor feedback: Resubmission required? No Task 14 — Impact of credit history John tells you that his former wife failed to properly meet their unsecured personal loan debt obligations before they separated. Although John eventually repaid the debt he is afraid that this incident may count against him when he applies for a loan. What would you advise Johnabout: 1. Name two of the major credit reporting agencies and advise what information these files contain? Student response to Task 14: Question 1 Answer here Assessor feedback: Resubmission required? No 2. Advise what procedure is involved and the associated costs to obtain a copy of your own file from each of these agencies on both an urgent and a non-urgent basis and can a free copy be obtained? Student response to Task 14: Question 2 Answer here Assessor feedback: Resubmission required? No 3. If there are errors on the file what is the procedure for John to follow in order to have these errors rectified? Student response to Task 14: Question 3 Answer here Assessor feedback: Resubmission required? No 4. What are the Lender's legal obligations if they decline an application due to the content of the credit agency file? Student response to Task 14: Question 4 Answer here Assessor feedback: Resubmission required? No Task 15 — External dispute resolution During the course of the loan process, John is starting to become upset with the time it's taking to get him an approval. Although you've explained that this is because of delays with the lenders processing system due to staff being away, you're concerned the matter may escalate beyond your control. If COSL was your EDR provider, explain their role in the process. Student response to Task 15 Answer here Assessor feedback: Resubmission required? No Task 16 — Effective access to files The loan application is finally approved. Loan offers have been produced by the lender, as have numerous documents that the client needs to access and review. John's away at the moment, and his email provider has a size limit on the data that can be sent via email. What is a potential solution for John, and name a provider that could assist? Student response to Task 16 Answer here Assessor feedback: Resubmission required? No Appendix 1: Client information collection tool Appointment date: Appointment time: Applicant 1 Applicant 2 Surname Other names Contact details Address Phone (W) Phone (H) Mobile Email Employment How long? Previous employer How long? PAYG Self-employed Gross income ( p.a.) Number of dependants Motor vehicles Loan purpose Purchase price/Valuation Deposit Loan amount Borrowing capacity Assets and liabilities Assets Liabilities Details Market value Details Monthly payments Amount owing Property at: Mortgage with: Property at: Mortgage with: Property at: Mortgage with: Cash at bank Car leasing Other cash Personal loans 1. 2. Deposit paid on property Overdraft Motor vehicles: 1. 2. Other loans: 1. 2. Personal effects Credit card limit: $2000 Business value Credit card limit: $3000 Shares and investments Other: Superannuation Other: Other assets (give details) Other: Total assets Total liabilities Surplus/deficiency: Needs analysis 1 Name of your current lender? 2 What type of loan do you have? 3 Why did you choose this particular loan and lender? 3 What is the interest rate? 4 What are your payments? Amount 5 Frequency 6 Do you know the fees and charges? 7 What is your proposed purpose for the loan proceeds? 8 Branch access available 9 Internet banking available 10 Phone banking available 11 Lenders not to be considered 12 Type of loan sought 13 Interest rate 14 Payment frequency 15 Redraw 16 Offset 17 Salary crediting 18 Low fees and charges Notes Anticipated fees and charges Anticipated purchase price $ Deposit $ Loan amount $ LVR % Purchase costs Stamp duty on transfer $ Solicitor/conveyancer $ Rates and land taxes $ Pest inspection $ Borrowing costs Application/establishment fee $ Valuation fee $ Security admin fee $ Mortgage stamp duty $ LMI $ Registration of mortgage $ Release of mortgage $ Search fees $ Other $ Total $ Loan interview diary Name(s) of client(s) present at interview Date of interview: Location of interview Indicate all clients who were interviewed in person Do all of the clients appear to clearly understand English? Y/N If not, have the services of an interpreter been recommended? Y/N Do all of the clients clearly benefit from taking out this loan? Y/N If not, what inquiries have been made to ascertain the level of benefit to each party of the loan? Are any clients acting as though they are under duress or other disability? Y/N Are any clients acting as though they are unsure of anything about the loan? Y/N Are any of the clients acting as though they are unable to comprehend their obligations? Y/N Are there any guarantors? Y/N If yes is answered to any of the above questions, have the clients been advised to seek the services of a lawyer or financial adviser? Y/N Provide details of other pertinent information obtained during the loan interview which may be of interest or any unusual circumstances you may wish to record